FEATURED IN:
Home Toys,
October 1999
by: Kurt Scherf, Parks Associates
Here's one phrase many companies are hoping to eradicate in the 21st
century: "I'm bored, and there's nothing on!"
This is precisely the kind of
statement, likely emanating from the lips of some precocious child, that a number of
players from some very powerful industries - broadcasting, the Internet, computing,
gaming, and music - are hoping to quell in the next century. From Hollywood and Silicon
Valley and eastward to New York, companies are betting that a "digital
revolution" in home entertainment will change the way in which consumers receive and
interact with entertainment "bits" and their respective components.
The "Digital Millennium" and Entertainment
For consumers, tastes in entertainment preferences are likely to remain the same; the
difference will be found in the ways they receive and display content in their homes. As
for consumer tastes, music and video will likely continue to be popular diversions. As
Parks Associates announced in a recent press release, a
consumers' "wish list" for entertainment components in the home includes "a
bigger TV" (15%), "stereo components/stereo system" (13%), "a DVD
player" (10%), "home theater" (8%), and "a digital TV" (3%).
Although we don't hear consumers screaming for "streaming MP3 and MPEG-2 video
downloaded to a virtual server to be accessed by the residential gateway and sent, via the
home network, to various content portals," we believe they'll like this option. To
paraphrase the movie Field Of Dreams, "If you build it [the technology], he
[the consumer] will come."
Entertainment and computing applications also have a bearing on consumer attitudes
toward technology (and perhaps some insight into exactly which US households will be
likely early adopters of new applications at the beginning of the next century).
Networks @ Home: The National Scan of
Electronics Ownership study provides some key insight into the kinds of consumer
segments that will be the early adopters of the "gee-whiz" technology coming our
way. What we found were some dramatic differences in the attitudes toward technology of
homeowners who already have multiple-PCs and home theater systems and those consumers who
do not. In other words, technologies that make it easier for consumers to access and use
data and entertainment content will likely find their early support in these key target
segments.
The Platforms, the Platforms, the Platforms…
In the future, if consumer tastes still center on watching TV (or some kind of video) and
listening to music, then the goal of the entertainment industry will be to define how and
where these activities take place (and who will be participating). Currently, there is
much activity surrounding the development of various "black boxes," which create
new possibilities in the delivery of and interaction with digital content. For example:
Set-Top Boxes:
Although set-tops have been primarily the tool of cable companies to deliver cable
programming, this will soon change. The September 15, 1999, announcement by Motorola Inc.
that it was merging with set-top manufacturer General Instrument Corp. is but one example
of set-top box's perceived significance as a medium for digital content and interactive
television. Comments by Motorola's chairman and chief executive officer, Christopher B.
Galvin, point to the future of the television "black box." According to
Motorola, the merger will allow the Company to "expand our portfolio for network
access, delivering next-generation solutions along with 'home hubs' that will handle
high-speed Internet access and video entertainment."
Other companies are as intent to utilize the set-top as a residential gateway for
advanced services. For example, Microsoft Corp.'s $5 billion investment in AT&T
earlier in 1999 is seen as a way to ensure that its CE operating system is found in as
many as 5 million AT&T set-tops. Scientific-Atlanta is not resting on its laurels,
either. Sales of the Company's advanced set-top box have boosted sales. Sony Corp. has
also entered the cable set-top box market with a bang, closing a $1 billion deal to
manufacture 3 million advanced platforms for Cablevision Systems. And these devices,
according to the Federal Communications Commission (FCC), will be available at the retail
level by July 2000 to, in the words of the FCC, "enhance innovation and bring
consumers better prices."
Digital Recording Devices:
The "personal video recorder" (PVR) or "personal TV systems"
revolution, embodied in the form of digital recording devices from TiVo and Replay
Networks Inc., now reaches the consumer directly. As of September 10, 1999, TiVo
appliances are available at Best Buy specialty retail stores. This announcement was
preceded by a flurry of activity over the summer, in which TiVo and Replay Networks
announced a series of investment agreements. Chief among the financial backers of both
companies are a number of top-level television networks and content providers (chief among
them are CBS, Cox Communications, Discovery Communications Inc., NBC, Showtime Networks
Inc., Time Warner , and The Walt Disney Company) many of whom were initially threatening
to sue one or more of the companies. I guess the old adage "If you can't beat 'em,
join 'em," has been altered to read, "If you can't kill 'em, make money off
'em!"
Game Consoles:
Video game players are still largely the realm of teenage boys, but as they get more
advanced, they may in fact serve as gateways for high-speed Internet access and enriched
content - which appeal to all members of the family. And that appears to be the strategy
of the major game platform developers.
Sony Computer Entertainment Inc. remains relatively tight-lipped about its plans for
the PlayStation®2, which is scheduled for a March 2000 release in Japan and a later
release in the US. However, what Sony has publicized about the next-generation gaming
console is that it will serve as a "platform for Internet-based electronic
distribution of digital content." The console will include a way to connect to a
cable modem, which will serve to help "download data-intensive computer entertainment
content to hard-disc drives" provided by the Company.
Why is this significant? Well, it probably doesn't mean that the PC is going away as a
productivity or entertainment platform, at least not in the very near term. Parks
Associates' study - Networks @ Home:
Multiple-PC Households - reveals that PC ownership is high, even in households with
more than one gaming console. On the other hand, what Sony is proposing could allow the
game console to serve as a gateway and/or centerpiece to a broadband home network based on
entertainment content. In fact, our consumer research indicates that consumers in
multiple-PC households who currently own one or more game consoles are more receptive to
the possibility of PC-based appliance or entertainment system in the home. More
importantly, they are willing to pay significantly more for such a product or system! So
there apparently does exist a good opportunity for the gaming folks.
…And Speaking of Content…
Sony is not the only company striving to build a business model based on
"e-content." Dallas-based Panja (formerly AMX/PHAST Corp.) plans to provide the
hardware to deliver a variety of content (developed through partnerships with Internet
content providers) through broadband pipes into the home. Panja has aligned itself with
content providers such as Infoseek to bring specialized content - news, stock updates,
music, and video - into the home. Then, by its utilizing its experience with high-end home
control systems, Panja can set up a system that will route specific content and data to
appropriate devices in the home, such as a touch screen, a television, or a stereo. Is
"pay-per-bit" entertainment the wave of the future? With Sony, Panja, and other
entities pursuing other opportunities - particularly in the area of video-on-demand - it
could very well become a reality.
Panja is set to demonstrate its technology in connection with Replay Networks. This
demonstration will take place at Parks Associates' Forum'99:
Defining the Digital Millennium, held October 25-27 at Rancho Mirage, California.
Parks Associates is pleased to welcome Panja and more than 20 other sponsors - including
Home Toys, a publication sponsor - to the only
cross-industry conference that moves beyond standards to discuss the business issues,
strategies, and opportunities across industries. For more information about Forum'99,
please call Parks Associates at (972) 490-1113.
